v.19 n. 52 – Released December 29, 2015
This Week’s Headlines:
- November State and Local Employment Report
- California Home Sales and Median Prices in November
- Personal Income Growth Strengthens in November
- Headline Inflation Unchanged in November
- Industrial Production
- California State Tax Revenues Rise by 4.1% in 3Q15
- U.S. Travel and Tourism Continues to Grow
- Events of Interest
- February 17, 2016: LAEDC February Economic Outlook
The Employment Development Department (EDD) released the state and local employment reports for the month of November. Total California nonfarm employment increased by 5,500 jobs over the month in seasonally adjusted (SA) terms. Before adjusting for seasonality, the gain was 78,600 jobs. The year-over-year change showed an increase of 417,100 jobs (SA). This equated to a growth rate of 2.6%. This was the slowest rate of increase since September 2012 when it was 2.5%, but still exceeded the November national increase of 1.9%. California’s private sector added 378,400 jobs (an increase of 2.8% over the year), while employment in the public sector rose by 1.6% (38,700 jobs).
Industry employment held to trend in November with nine of the 11 super-sectors adding jobs over the year: construction; trade, transportation and utilities; information; financial activities; professional and business services; educational and health services; leisure and hospitality; other services; and government for a combined gain of 424,300 jobs. Professional and business services posted the largest gain on a numerical basis, adding 116,000 jobs (up 4.7%), while construction continues to claim the largest gain in percentage terms, increasing by 5.9% and adding 41,000 jobs.
Two industry sectors recorded a decline in November. Mining and logging employment dropped by 9.3%, a loss of 2,900 jobs, while manufacturing employment was down by 0.3% or 4,300 jobs.
California’s unemployment rate declined slightly from 5.8% in October to 5.7% in November and was down from the year ago rate of 7.2%. California’s unemployment rate is now the lowest it has been since November 2007 when it was also 5.7%. The number of employed persons in California now stands at 17,910,100 (an increase of 2.1% over the year), while the number of unemployed workers tumbled by 20.2% over the same period to 1,081,800 in November. Although California has been working its way up the ranks, it still had the 13th highest unemployment rate in the nation last month, while at 2.7%, North Dakota had the lowest.
(Note: With the exception of the Los Angeles unemployment rate, county level numbers are not seasonally adjusted, which means there can be large month-to-month fluctuations in job counts. A truer picture of how local labor markets are faring is revealed by focusing on the year-over-year numbers. Annual trends “correct” for the seasonal factors that influence certain industry sectors over the course of the year.)
- In Los Angeles County, the seasonally adjusted unemployment rate was 5.9%, down from 6.0% in October and below the year ago rate of 8.0%. Total nonfarm employment (not seasonally adjusted) increased by 22,200 jobs over the month and was up over the year by 73,200 jobs, an increase of 1.7%.
- Educational and health services posted the largest year-over-year gain in employment in November with a net increase of 22,400 jobs. The health care industry added 24,800 jobs, but a decline of 2,400 jobs in educational services partially offset the increase.
- Also recording significant job gains were leisure and hospitality, which picked up 19,700 jobs, 87% of which were in accommodation and food services, and professional and business services employment with the addition 15,900 jobs.
- Four major industry sectors reported year-over-year declines in November: manufacturing employment contracted by 7,500 jobs; information lost 7,300 jobs; financial activities was down by 300 jobs, and in the mining and logging sector, job counts fell by 400.
- In November, the unemployment rate in Orange County was 4.2%, down from 4.3% in October and below the year-ago figure of 5.2%. Nonfarm payroll jobs increased by 11,600 over the month and were up by 39,000 over the year (an increase of 2.5%).
- In the Riverside-San Bernardino area, the unemployment rate in November was 6.1% compared with 6.3% in October and below the year ago estimate of 7.6%. The Inland Empire gained 17,900 nonfarm payroll jobs over the month and 46,100 over the year. This represented an increase of 3.5%.
- In Ventura County, the unemployment rate was 5.4%, unchanged over the month but down from the year ago estimate of 6.6%. Total nonfarm employment was up by 2,400 jobs over the month and by 8,500 jobs over the year (up by 2.9%).
Summary: California led the nation with the largest annual wage and salary job gain of 417,100 in November, while the unemployment rate fell to its lowest in over eight years. In Southern California, every region saw decreases in unemployment rates and job gains in key industries such as health care, professional and business services, construction, and leisure and hospitality. (Kimberly Ritter-Martinez)
Source: California EDD, LMID
The California Association of Realtors (CAR) recently released their report on California existing home sales and median prices in November. The statewide median price fell slightly (by 0.2%) compared with October to $475,000, but was up over the year by 6.8%.
The number of single-family homes in California that closed escrow in November fell by 1.6% over the year to 369,680 units (seasonally adjusted annualized rate). Compared with October, sales were down by 8.4%. This was the first time sales dipped below 400,000 since March 2015 and was the first year-over-year decline since January 2015.
Mortgage interest rates inched up in November, with the 30-year, fixed-mortgage interest rate averaging 3.94%, up from 3.80% in October, but below the year ago rate of 4.00%. The Federal Reserve’s recent announcement that it would raise the Federal Funds rate has been anticipated for a long time and should not initially have an adverse impact on the housing market since interest rates are still at historical lows. The CAR report noted that the increase might actually help home sales in the near-term. Potential buyers who had been hesitating may finally move now that interest rates are expected to begin a slow but steady rise over the next few years.
Below is a year-over-year summary of sales and price activity in Southern California by county. Although the statewide sales figures are seasonally adjusted, regional and county figures are not.
- Los Angeles County: unit sales declined by 5.5% over the year in November, while the median price rose by 5.5% to $457,870
- Orange County: sales fell by 5.0% as the median price increased by 3.1% to $711,030
- Riverside County: sales of existing homes edged down by 1.4% and the median price moved higher by 5.1% to $337,200
- San Bernardino County: sales slipped by 1.4% in November but the median price increased by 10.5% to $236,220
- San Diego County: unit sales edged up by 0.8% and the median price rose by 12.8% to $554,440
- Ventura County: sales declined by 5.4% over the year while the median price rose by 13.5% to $623,400
Total personal income in the U.S. increased in November by 0.3% on a nominal basis. Strong growth in employment and an increase in the number of hours worked supported an increase of 0.5% in total wages and salaries, which make up just over half of total personal income in the U.S.
Real disposable income (adjusted for taxes and inflation) rose by 0.2%. Real personal consumption expenditures, on the other hand, rose at a slightly faster rate – 0.3%. Accordingly, the personal saving rate dipped to 5.5% in November from 5.6% in October. Real spending on durable goods was up by 1.1% over the month, while spending on nondurable goods rose by 0.9%. Spending on services, which comprise 65% of consumer spending, was flat for the second month in a row.
On a year-to-year basis, incomes and spending moved higher in November:
- Real disposable income rose by 3.5% in November, slowing slightly from the October rate of 3.8%
- Real personal consumption expenditures grew by 2.5%
- Growth in real spending on goods (3.6%) outpaced spending on services (2.0%) although in dollar terms, Americans spend more than two times as much on services as they do goods
Consumer prices were unchanged over the month in November but edged up over the year by 0.4%. Excluding food and energy, prices advanced by 1.3%.
In addition to the national figures on personal income, the BEA also released a report on state personal income for the third quarter of 2015. In California, personal income increased by 1.4% compared with the second quarter of this year, slightly ahead of the national average of 1.3%. Personal income grew the fastest in Nebraska and South Dakota (both at 2.2%), while Alaska posted the slowest rate of growth at 0.6%. California ranked 14th in terms of percent growth over the quarter. Compared with the third quarter of 2014, personal income in California increased by 6.5% versus 4.6% for the nation as a whole. (Kimberly Ritter-Martinez)
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November (seasonally adjusted). Over the year, the all items index was up 0.5% (not seasonally adjusted), the largest 12-month increase so far in 2015, while the core index growth was stable at 2.0%.
- Overall, the food index ticked down by 0.1%. However, this month’s divergence in the prices for food at home (which fell 0.3%) relative to food away from home (which rose 0.2%) underscores the strengthening of the U.S. consumer economy: as employment has improved, discretionary spending on items such as eating out has picked up.
- The energy index fell 1.3% in November after increasing 0.3% in October. All major component prices were down with the exception of electricity. Over the year the energy index declined 14.7%, dragged down by the global decline in demand for oil as well as a decrease in demand for heating oil due to this year’s unseasonably warm weather.
- The core index (all items less food and energy) moved up by 0.2% again in November. Over the year, the index for all items less food and energy was up 2.0%. This is the largest 12-month increase in about a year and a half, lending further support to the Fed’s decision to increase interest rates. The majority of this increase can be attributed to increasing prices for shelter.
Local Area Consumer Price Index
The Los Angeles CMSA (LA-Riverside-OC) Consumer Price Index was unchanged last month, and increased by 1.6% compared to a year ago.
- The local area food index ticket up by 0.1% in November, with prices for food away from home increasing 0.7% relative to a 0.3% decline in prices for food at home. The food index increased by 1.5% over the year.
- The energy index declined 3.7% last month, mainly due to lower gasoline prices (-3.9%). Over the year, the energy index was down 8.6% (gasoline -11.1%, natural gas -5.8%, electricity -4.4%).
- The index for all items less food and energy was up by 0.2%. Over the past 12 months the core index has advanced by 2.6%, helped along by higher prices for medical care and shelter.
(Note: Local consumer price index data are not seasonally adjusted.)
The Federal Reserve Industrial Production Index continued its decline in November, moving down 0.6% from October revised levels. Over the year, the index was down 1.2%.
U.S. industrial production in the manufacturing industry was flat in November, and up 0.9% over the year revised. Most non-durable goods showed increased production (0.5% gain), but this was offset by declines in durable goods and other manufacturing industries (-0.2% and -1.7%, respectively). Industries with large losses (1.0% or more) included primary metals; electrical equipment, appliances and components; apparel and leather; and motor vehicles and parts.
Relative to a year ago, the index for oil and gas well drilling and servicing has declined by more than half, reflecting the global weakness in energy markets. This contributed to a decline in industrial production in the mining industry of 8.2% over the year (-1.1% in November). Industrial production in the utilities industry was also down 7.6% over the year (-4.3% in November) with the continuation of unseasonably warm winter weather.
The Capacity Utilization Rate for manufacturing decreased slightly in November to 76.2%, down from 76.3% in September and still somewhat below the long-run average rate of 78.5%. Many industries are showing softness in capacity utilization, suggesting a lingering slack in the economy that could diffuse prices pressures in an already soft price environment. (Bengte Evenson)
Source: Federal Reserve
The U.S. Census Bureau released figures for third quarter state and local tax collections by state and type of tax. At $211.5 billion, total state tax revenues collected across all fifty states (excluding Washington, DC) were up by 3.2% in the third quarter of 2015 compared with the same period in 2014. In California, tax revenues were up by 4.1% to $32.7 billion in the third quarter – a reflection of stronger economic growth and the improving health of state and local government finances within California.
Two of California’s three largest tax revenue categories reported increases in collections during the third quarter. General sales tax revenues rose by 3.0% to $9.0 billion, but were outpaced by the national increase of 4.4%. Personal income tax revenues were $15.6 billion in the third quarter, an increase of 8.9%. Nationally, personal income taxes were up by 6.2%. Personal income taxes are California’s largest revenue source (making up nearly half of all tax revenues collected in the third quarter), but personal income tax revenues are also notoriously volatile making budget planning and forecasting difficult.
California’s corporations paid $1.3 billion in income taxes during the third quarter, a decline of 17.6% compared with the same period a year ago. Corporate tax payments tend to be even more volatile than personal income taxes, but they count for a relatively small share of California’s “Big Three” revenue sources. Across the U.S., corporate income tax revenues edged down by 0.1%.
Other noteworthy changes include a 9.5% increase in California’s property tax revenues, the result of rising home prices, and a decline of 8.7% in motor fuel taxes, which help to fund expansion and maintenance of state’s roads and highways.
Altogether, sales and personal income taxes made up 67% of state revenues nationwide. California relies more heavily on these two revenue sources compared to other states. Sales and personal income taxes regularly contribute about 75% of total tax revenues received in a given quarter. (Kimberly Ritter-Martinez)
Source: U.S. Census Bureau
Real spending on travel and tourism increased by 4.3% (seasonally adjusted annualized rate) during the third quarter of 2015. This followed an increase of 8.4% in the second quarter. In comparison, real gross domestic product rose by 2.0% during the third quarter. The Bureau of Economic Analysis tracks the travel and tourism industry in the United State because it is an important source of jobs and economic activity, particularly here in Southern California. Additionally, foreign visitors traveling to the U.S. are an important source of export revenue.
Spending on travel-related goods and services was $839.6 billion during the third quarter of this year, compared with $830.9 billion in the previous quarter. Spending on traveler accommodations rose by 4.0%, while spending on transportation increased by 9.6% (passenger air transportation was up by 13.3%). Tourism spending at restaurants and bars ticked up by 1.0% but spending on recreation, shopping and entertainment declined by 1.7%.
Overall, prices for travel and tourism goods and services in the third quarter edged down by 0.3%. Prices were up in a number of sectors: accommodations (2.6%); food and drinking establishments (2.3%); recreation and entertainment venues (1.3%) and shopping (0.8%); but those gains were more than offset by falling prices for air transportation (-7.9%).
The travel and tourism industry has been a source of steady job growth since the second quarter of 2010. Direct employment in this sector increased by 2.2% during the third quarter after expanding by 1.6% in the previous quarter. All travel-related sectors posted a gain in employment, ranging from 4.0% for air transportation to 0.9% for traveler accommodations. During the third quarter, nearly 5.7 million workers were employed in the U.S. travel and tourism industry, which equated to about 4.0% of total nonfarm employment.
Source: U.S. Bureau of Economic Analysis
February 17, 2016: LAEDC February Economic Outlook
Omni Hotel: 251 S Olive St, Los Angeles, CA 90012; 7:00 am to 11:00 am
LAEDC’s Annual Economic Forecast & Industry Outlook is an accurate planning tool for the coming year, and the special topic of The Next Generation of Mobility will provide an insider’s look at what lies ahead for our region in the areas of autonomous vehicles, commercial drones, high-speed commuting, goods movement, and the impact of this innovation on our cities.